Wanted: inner-city supermarkets

Philadelphia's First Oriental Market received Fresh Food Financing to be able to provide local shoppers fresh, healthy food.

Courtesy of David Adler/The Food Trust

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Grocer Jeff Brown put a lot of sweat into his ShopRite supermarket in inner-city Philadelphia: He built a pork-free meat room for Muslim customers, stocked the aisles with the Jamaican and African cuisine that neighbors requested, and taught job skills to the hires new to the workforce.

Despite skyrocketing commodity prices, Mr. Brown says the store – a venture that he never could have opened without a loan from Pennsylvania’s Fresh Food Financing Initiative – is making money.

Brown’s ShopRite is more than just a driver of urban development. It’s part of a major public-health program aimed at squashing obesity and related concerns such as heart disease and diabetes.

“There aren’t any other supermarkets within two to three miles,” he says. Without his store, the patrons “would probably eat at McDonald’s or shop at a drug store or the dollar store for food – none healthy or fresh.”

Pennsylvania’s Fresh Food Financing Initiative (FFFI) is believed to be the nation’s only statewide public-private funding initiative dedicated to opening grocery stores in underserved areas. In three years, the $120 million fund has provided “gap financing” – money beyond what a grocer normally could receive in grants and loans – to open or update 52 supermarkets statewide, creating some 4,000 jobs in the process.

From its inception, the plan has been admired by policy experts for its merging of economic and public-health innovations. But as gasoline and food prices continue to rise, the FFFI is attracting increased attention.

Diet was the main concern in 2002 when an employee of the Food Trust – a Philadelphia group dedicated to increasing access to healthy, affordable food – stopped state Rep. Dwight Evans on his evening walk. Public health and economic development initiatives existed in many low-income Philadelphia areas. But the ends weren’t meeting, and residents’ food shopping options were still drugstores, expensive corner shops, or fast food.

“We hadn’t had a real policy about food access that was coherent, and the big challenges are the issue of obesity, the generation of jobs, and community transformation,” Mr. Evans says.

Convinced a grocery store initiative could be an answer, Evans persuaded the governor to establish the FFFI with $10 million included in a 2005 stimulus bill, followed by another $10 million in 2006 and in 2007.

Public-private state initiatives can be hard to manage, says Steve Goldsmith, a former mayor of Indianapolis and professor at Harvard University’s Kennedy School of Government. Mr. Goldsmith heads a Harvard awards program for policy innovations, in which the FFFI is a finalist. “It’s often very complex, and the fact that public money was flexible and the private sector was involved looking at risk” in this dual-purpose initiative is intriguing.

Part of that flexibility required delving more deeply than conventional market analysis to assure the grocers that low-income areas could sustain a supermarket. In its own study, the Food Trust used population density figures and local spending data – rather than median household income, a more common tool – to estimate that Philadelphia’s inner-city communities hold at least $50 million of retail buying power per mile.

FFFI’s gap financing covers grocers’ operating needs. For example, Brown needed help paying for security and training – such costs for inner-city stores are much higher than those for the suburban shops that he owns. And in this case, Brown says that he can’t pass the costs on to customers. “There would be no way to do this. These are customers with very modest means,” he says.

Brown’s ShopRite opened alongside several large stores, creating 900 jobs just in that one neighborhood, he says. “Which means 900 families can buy food and get off of welfare,” Brown says. (Most of his employees live in the local community.)

Mr. Klothen notes that there’s still work to be done. For one, many of the new jobs earn enough money to feed an individual, but still not enough to support a whole family.

Nonetheless, most observers, including Klothen, agree the project is a success.

While several cities have their own supermarket programs, FFFI’s success has sparked a slew of cities and states contacting Representative Evans and plan partners about replicating the program – an idea they embrace.

“When you get going, it really works,” Klothen says. “It’s a good role for government to play – making it possible for the private sector to do what it does best and can’t do without gap financing.”